Hard Times Ahead for Labor

In ’82, unions may be talking more about givebacks than pay increases

For millions of American workers, 1982 will be a year of anxious waiting. With unemployment reaching toward 9%, and perhaps higher, and an economy starting the year in a steep decline, employees will be worrying about job security and the prospect of very modest pay increases.

Major labor negotiations are due to take place during the year. The auto and rubber workers and the teamsters are all bargaining for new contracts. Although such groups represent only a small fraction of the total American labor force, they traditionally have set the wage pattern for the rest of unionized employees and even influenced wage settlements for many nonunion workers.

But the atmosphere is far different from three years ago, when those unions last bargained. At that time the auto workers won an agreement that has pushed their pay up 15% in each of the last two years and the rubber workers got a contract that will be worth about 50% over three years. The trend-setters this time will be fighting a rear-guard action to avoid giving up gains made in past negotiations rather than bargaining for important new pay hikes.

In a move indicative of the tough times facing organized labor, the United Auto Workers union last week agreed to consider reopening existing three-year labor contracts with General Motors and Ford. This may lead to some benefit reductions. “The depression in the auto industry has gone from bad to worse,” said Donald Ephlin, director of the union’s Ford department. “I want to discuss the disastrous shape Ford is in, and what can be done to protect the jobs of the workers.”

For the first time in more than three decades, management this year almost totally dominates wage negotiations. Companies in the past were often ready to give in to worker demands in order to keep their plants operating. But now with union leaders more concerned with job security for their members, talk of long strikes or costly wage settlements has virtually disappeared. Admits AFL-CIO Economist John Zalusky: “It looks like a tough year, the toughest in memory.”

Nowhere are labor’s troubles more evident than in Detroit. As the U.S. auto industry this week limps to the end of its worst sales year since 1961, 345,000 members of the U.A.W. are on temporary or indefinite layoff. Moreover, the union’s active membership has shrunk by 300,000 workers since 1979, to 1.2 million. Chrysler has been on the intensive-care list for more than two years, and union officials are now worried about the survival of American Motors. Admits U.A.W. President Douglas Fraser: “The industry and, consequently, the workers are in deep, deep trouble.”

The automakers have begun an unprecedented campaign to persuade the union to lower its sights when talks on a new three-year contract begin. GM showed a 22-min. color film called A Battle for Survival to some 400,000 unionized workers in an attempt to encourage them to hold down demands. A pointed message in the presentation: American labor costs are $8 per hr. more than in Japan, and U.S. firms can only compete if they can narrow that gap. GM wants to put a lid on automatic cost of living allowances, increase employee contributions to health plans, and reduce holiday and vacation time. U.A.W. members now receive $19.65 per hr. in wages and fringe benefts and get 43 paid days off a year.

In exchange for limited wage increases, the U.A.W. is expected to demand more job security for its members. Automakers are replacing assembly-line workers with robots and threatening to move more production facilities overseas to reduce labor costs. The union will be trying to keep jobs for workers now employed. U.A.W. President Fraser has recently been advocating something like the Japanese system of lifetime employment.

Some U.A.W. members are talking tough about contract concessions.

Complains Don Douglas, who heads the union local at GM’s Pontiac, Mich., truck plant: “We shouldn’t have to pay for management’s blunders.” Adds Machinist Larry Self, a 16-year veteran of the union: “I don’t think management is hurting as bad as they say. Why don’t they go to the shareholders, and tell them they are cutting the dividend rather than take it out of the hide of the worker?”

Employees at Ford plants, though, are generally more conciliatory. Says Mike Rinaldi, president of the U.A.W. local in Dearborn: “We have no objections to going in and talking to the company to see where they are coming from. I think Ford is in serious trouble.”

In addition to its difficulties in Detroit, the U.A.W. is also worried about the jobs of its 109,000 members working in the agricultural-machinery industry, where manufacturers have been hard hit by falling farm incomes. International Harvester lost $636 million in its fiscal year ending Oct. 31, and only last week won an agreement with its lenders to ease repayment terms on more than $4 billion in debt. The company now has 12,000 of its U.A.W. workers on indefinite layoff.

The depression in autos has been a severe blow to the rubber industry, and weakened the bargaining position of the United Rubber Workers union. Over the past two years, 18 tire plants have been closed and 25,000 jobs eliminated. Says Ralph Eifert, Firestone’s vice president of employee relations: “We’re in difficult times. We know it, and the unions know it too.” The four major tire manufacturers (Goodyear, Firestone, B.F. Goodrich and Uniroyal) want to reduce paid holidays and other fringe benefits and cut back on cost of living adjustments.

Rubber workers are not expecting anything like the settlements they have known in the past. Says John Nardella, president of Goodyear Local No. 2 in Akron: “Workers are pessimistic as hell.”

One of the union objectives this year will be to win more jobs for members by getting preferential hiring rights at nonunion tire plants in the South. Says Union President Milan Stone: “We’re concerned with employment for our people.”

Contract talks have already started between the International Brotherhood of Teamsters and 284 major trucking companies. With one-fifth of the union’s 300,000 drivers and warehouse workers laid off, Teamsters President Roy Williams has said that his demands would be “reasonable.” The union won a $1.50-per-hr. pay increase in its last contract on top of cost of living allowances, pushing hourly wages to an average $12.80. But it is not asking for any additional hike this year.

Instead, it wants the right to reopen its contract when economic conditions improve. Meanwhile, truck-fleet owners have made headway, toward changes in work rules that would allow drivers to deliver their shipments directly to customers, rather than drop them at intermediate warehouses.

This year’s contract settlements will be crucial in the long-term battle against inflation. Labor costs make up about two-thirds of the price of a company’s products or services, and it is nearly impossible to keep the underlying rate of inflation be low double digits if wages are increasing at 10% or more annually.

Washington-based Economic Consultant Michael Evans predicts that wages in 1982 will increase no faster than the inflation rate, probably by about 8%. At the same time, he estimates, givebacks on fringe benefits and time off, combined with productivity increases, will slice 3% from operating expenses. The result: a reduction of about 3% in real labor costs during 1982. After years of ever higher unit-labor costs, that could be a small but important step in the struggle against inflation. —By Alexander L. Taylor III. Reported by David Beckwith/Washington and Paul A. Witteman ‘Detroit